Repurchase Agreement

Repurchase agreement where a seller of some sort of security agrees to acquire it back from the buyer at a larger price on some sort of specified date. These agreements have been in effect loans concerning investors to suppliers, and are utilized usually for raising short-run finance by financial institutions and corporations. Repos are used also by the central banks seeing that instruments of financial policy. To temporarily expand the bucks supply, a central financial institution decreases the discount rate from which it buys back government securities in the commercial banks, to contract or maintain the money supply it raises the repo rate.